The Business Model Canvas Explained
Startup entrepreneurs usually groan when we mention business planning. If you are thinking of starting a business, then using the business model canvas strategy takes a lot of stress out of organizing your thoughts and will make writing your business plan a lot easier. A business model canvas is shaping and evolving your business idea into what it will look like as a launched company. It helps you sketch and map out your ideas.
All you need is a large whiteboard or sheet of paper and lots of post-it notes or a spreadsheet. It’s like playing in the sandbox. You get your entrepreneurial team together to brainstorm what your business will look like before you actually go to the bank for funding. You can test this with your potential customers and then go back to your canvas if it doesn’t sound like a great idea.
The business model canvas strategy is the brainchild of Dr. Alexander Osterwalder of Switzerland and has been used by many consulting companies, colleges and entrepreneurs worldwide. For those who love to read, Osterwalder has written a best selling book on the subject.
The basic idea is that businesses have 9 elements at their core, 5 are related to the customers and four are back office activities. All the blocks are inter-related.
Business Model Canvas Video
This 2 minute video by Strategyzer explains how this business model works.
9 Blocks of the Business Model Canvas
Here’s what the 9 blocks look like. The blocks in red are customer facing and the others are internal activities.
These 9 blocks are divided into:
5 Front Facing (related to Customer)
- Customer Segments (types of customers)
- Value Proposition (what makes you different from your competitors)
- Channels (distribution, how the products get to the customers)
- Customer Relationships (where are the connections to the customer)
- Revenue Streams (where does the Company get it’s income from)
4 Back Facing (internal business workings)
- Key Resources (people, manufacturing)
- Key Activities (what does your Company do to produce the goods and/or services)
- Key Partnerships (what other companies or people are key to your business)
- Cost Structure (what makes up the costs of your products)
A Business Model Canvas Example
Now let’s say we are thinking of starting a new company, a specialty take-out restaurant for paleo meals and gluten free snacks. What are the 5 customer related activities for this type of Company?
Front Facing Customer Related Activities
- Anyone in the local community who is gluten intolerant. Research showed that 1/3rd of Canadians are gluten intolerant. Out of a population of around 900,000 residents, 300,000 people could possibly buy these products and are the target market of consumers.
- Athletes who are in training at a cross-fit gym. Cross fit gyms often have a 30 day challenge, where they encourage participants to eat the paleo diet to see the effect on fitness and weight.
- Firefighters, paramedics and police officers, all who work long shifts but want to keep in shape by eating healthy foods and snacks.
- Convenience of buying meals to take to work or home
- Foods are made from healthy ingredients and contain no refined sugars
- Can have a 30 day meal plan developed around food preferences
- Can pick up fresh or frozen meals/snacks
- Learn how to cook this food in cooking classes
- Direct to the consumer (pick up from the restaurant directly)
- Through cross fit gyms
- Home/work delivery
- Order from the web
- Cooking classes
- Cross fit gyms and their members
- Celiac Association
- Individuals in the firefighter, police and paramedic community who work long shifts
- In store sales
- Cooking classes
- On line orders
- Bookings from Gym members for paleo challenge diets
Back Facing – Internal Related Activities
- Owners of similar paleo restaurant in nearby city
- Pool of students for part time help
- Branding with cross fit community
- Social Media
- Development of recipes
- Marketing via social media, with focus on Facebook
- Changing menu daily
- Packaging meals for meal plans
- Sourcing hormone free proteins and non-modified grains
- Cooking and baking
- Wholesale food suppliers
- Cross Fit Gyms
- Organic food suppliers
- Other paleo takeouts in neighbouring communities
- Other businesses in plaza (cross sell)
- Per portion costing
- Sales and Marketing costs
- Loyalty club acquisition costs
- Cooking Class Setup
Now we have thought about the 9 elements, we can put them in our chart. Here’s what the chart might look like.
NEXT STEP – TEST THE BUSINESS MODEL CANVAS
Test the model by talking to customers and refining it if it doesn’t look like it’s working. This can be used for mapping any kind of business, even on-line models. Once you have your business model canvas refined, next you can develop a business plan. Although some in the business community believe a business plan is obsolete, if you are looking for financing, you still need a business plan. We have made that process easy to understand. Head over to our blog for how to put one together. Or if you need help with your business plan, contact us today.